London's Design Museum will establish a free permanent collection from 2016, following its relocation to new premises in Kensington.
Chancellor of the Exchequer, George Osborne, confirmed the museum has been included in the current VAT refund scheme for museum and galleries.
He tweeted that it was "all part of our plan to make UK & London best place in world for creative industries".
It usually costs £12.40 for adult entry to the museum.
The Design Museum, which currently sits on the River Thames near Tower Bridge, will relocate to the former Commonwealth Institute in two years' time. The listed Kensington building has been largely unoccupied since 2001.
The new site will give the museum three times more space for its collection, temporary exhibitions and learning programmes. Visitor numbers are expected to more than double to 650,000 in the first year. More on this story - BBC News
